Insurance Stocks' Q2 Earnings Due on Aug 3: MET, ALL & More
The second-quarter 2022 earnings season is expected to bring mixed results for the players in the insurance space. Several factors like strong retention, accelerated digitalization, interest rate hikes, reinsurance agreements, favorable renewals and organic business growth might have boosted the insurance stocks’ June-quarter results. Yet, increased claims frequency, expenses and soft pricing might have been spoilsports. Some of the Insurance stocks like MetLife, Inc. MET, The Allstate Corporation ALL, Sun Life Financial Inc. SLF, American Financial Group, Inc. AFG and Lincoln National Corporation LNC are set to announce quarterly numbers on Wednesday Aug 3.
The insurance space belongs to the Finance sector (one of the 16 broad Zacks sectors within the Zacks Industry classification), overall earnings of which are projected to decline 18.8% from the year-ago quarter’s reported figure, while revenues are expected to inch up 3.2%, as indicated by our latest Earnings Preview. The downward estimate for earnings might have been caused by a soft pricing environment, and higher costs and expenses. However, increased earned premiums are expected to have partially offset the negatives.
Let’s delve deeper and look at the key factors that are likely to have impacted the insurance stocks during the second quarter.
Major Impacting Factors
Business activities gaining momentum throughout the second quarter might have boosted demand for insurance products. Product diversification and redesigning might have aided the companies in addressing rising demand. This is likely to have stimulated the insurers’ revenues in the said period. Growing awareness following the onset of COVID-19 pandemic continued to support the businesses in the quarter.
Exposure management and improved reinsurance programs might have played a vital role in the second-quarter results. Frequent occurrences of natural disasters and an active catastrophe environment are expected to have accelerated policy renewals and provided an impetus to the pricing environment, which otherwise suffers fierce competition. Players in the life insurance business are expected to have gained from the policy renewal rate and buoyant demand for protection products. Per Deloitte Insights, growth in premiums written in both life and non-life is expected to increase 7.4% in the emerging markets this year.
Accelerated digitalization and the emergence of insurtech are expected to have continued boosting the operating efficiency of the insurance companies in the second quarter. Technologies like blockchain, artificial intelligence, cloud computing, advanced analytics, telematics and robotic process automation are aiding seamless operations and reducing costs. This, in turn, might have boosted the profit levels of the insurance players.
Greater relaxation of COVID-related restrictions and the rising frequency of travel across the world are likely to have increased auto premiums in the quarter under review. Moreover, a low unemployment rate and ramped-up economic activities are likely to have boosted the commercial insurance and group insurance businesses in the quarter.
The improving interest rate environment is expected to have benefited the life insurers, who have a substantial amount of rate-sensitive products and investments. A favorable interest rate drives profits, capital and reserves, liquidity as well as the competitiveness of life insurers. Hence, these companies are likely to have witnessed higher investment yields in the second quarter. However, interest expense could have increased in the quarter under review, squeezing profits.
The competitive environment in the insurance space is likely to have kept pricing under pressure. The industry players spending more on growth initiatives to gain a competitive edge might have augmented their costs and expenses, which could have dented their short-term profits. Also, growth in business activities is expected to have induced higher claims frequency for the companies, affecting their bottom line in turn.
Insurance Providers Reporting on Aug 3
Against the backdrop discussed above, let’s find out how the following five companies are placed ahead of their second-quarter earnings release tomorrow.
Our proprietary model clearly indicates that a company needs to have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
MetLife: The Zacks Consensus Estimate for MetLife’s premiums is currently pegged at $10.5 billion, which suggests growth of 14.8% from the prior-year quarter’s reported figure. The consensus mark for adjusted earnings in Latin America indicates a 31.1% rise from the year-ago period’s actuals. However, the Zacks Consensus Estimate for MET’s U.S. business’ adjusted earnings is pegged at $639.6 million, which suggests a decline of 29.1% from the prior-year quarter’s reading.
The Zacks Consensus Estimate for the to-be-reported quarter’s bottom and top line stands at $1.55 per share and $16.5 billion, respectively. This indicates an earnings decline of 34.6% and a revenue increase of 1.8% from the corresponding year-ago quarter’s actuals. As far as earnings surprises are concerned, MetLife’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 42.9%.
Our proven model doesn’t predict an earnings beat for MetLife this time around. This is because the stock has an Earnings ESP of 0.00% and a Zacks Rank #3.
MetLife, Inc. Price and EPS Surprise
MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote
The Allstate Corporation: This leading property-casualty insurer’s second-quarter revenues might have been supported by better premiums. The consensus mark for net premiums earned from the Property-Liability business segment indicates an upside of 6% from the year-ago period’s level. The Zacks Consensus Estimate for net premiums earned from services implies an 18.5% increase from the year-ago quarter’s tally. However, Allstate’s earnings might have taken a hit from pre-tax catastrophe losses of $1.1 billion in the second quarter. Elevated catastrophe losses might have hampered the underwriting results of ALL, deteriorating the combined ratio.
The consensus mark for net investment income from the Property-Liability unit is currently pegged at $563.5 million, indicating a decline from $931 million in the year-ago period. Also, the consensus mark for overall net investment income indicates a 20.3% decrease from the prior-year quarter’s reported figure. (Read more: Higher Catastrophe Losses to Hurt Allstate's Q2 Earnings)
The Zacks Consensus Estimate for the to-be-reported quarter’s bottom and top line is pegged at a loss of $1.26 per share and $12.2 billion, respectively. This indicates an earnings and a revenue decline of 133.3% and 1.6%, respectively, from the corresponding year-ago quarter’s readings. Regarding earnings surprises are concerned, Allstate’s bottom line beat the Zacks Consensus Estimate in two of the last four quarters, missing the mark twice, the average negative surprise being 8.8%.
Our proven model doesn’t predict an earnings beat for ALL this time around. This is because the stock has an Earnings ESP of 0.00% and a Zacks Rank of 3.
The Allstate Corporation Price and EPS Surprise
The Allstate Corporation price-eps-surprise | The Allstate Corporation Quote
Sun Life Financial: SLF might have witnessed an increase in costs and expenses in the June quarter due to rising employee costs, premises and equipment, service fees, amortization of intangible assets and other expenses. This is likely to have affected SLF’s bottom line in the quarter under review. However, growth in insurance sales figures might have partially offset the negatives.
The Zacks Consensus Estimate for the to-be-reported quarter’s bottom line is pegged at $1.08 per share, suggesting a decline of 11.5% from the corresponding year-ago quarter’s reported number. As far as earnings surprises are concerned, Sun Life Financial’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and missed the mark once, the average surprise being 2.4%.
Our proven model doesn’t predict an earnings beat for Sun Life Financial this time around. This is because the stock has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
Sun Life Financial Inc. Price and EPS Surprise
Sun Life Financial Inc. price-eps-surprise | Sun Life Financial Inc. Quote
American Financial Group: The Zacks Consensus Estimate for American Financial Group’s net premiums earned from Property and Casualty for the second quarter indicates a 31.2% increase from the year-ago quarter’s finals. The consensus mark for the same metric from Specialty Casualty implies a 10.5% rise from the year-ago comparable period’s level.
However, the Zacks Consensus Estimate for the combined ratio in Property and Transportation is pegged at 88.4%, indicating that the company might have lost a huge chunk of premiums. Also, the consensus mark for the aggregate combined ratio is pegged at 92.2%, predicting a rise from 87.9% in the year-ago quarter. This could have induced lower profits for AFG in the second quarter.
The Zacks Consensus Estimate for the to-be-reported quarter’s bottom and top line is pegged at $2.24 per share and $1.7 billion, respectively. This indicates an earnings decline of 6.3% and revenue growth of 15.7%, from the corresponding year-ago quarter’s reported numbers. As far as earnings surprises are concerned, American Financial Group’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average being 41.7%.
Our proven model doesn’t predict an earnings beat for AFG this time around. This is because the stock has an Earnings ESP of -0.78% and a Zacks Rank #3.
American Financial Group, Inc. Price and EPS Surprise
American Financial Group, Inc. price-eps-surprise | American Financial Group, Inc. Quote
Lincoln National Corporation: Lincoln National’s Group Protection business is likely to have witnessed growth in the second quarter. The consensus mark for revenues from Group Protection indicates an upside of 5.2% from the year-ago quarter’s level. The Retirement business is expected to have gained from an improved economy and increased account values. However, the consensus mark for net investment income indicates a 13.8% decline in the second quarter from the year-ago period’s finals.
The Zacks Consensus Estimate for the to-be-reported quarter’s bottom and top line stands at $2.35 per share and $4.5 billion, respectively. This indicates an earnings and a revenue decline of 25.9% and 9% each from the respective year-earlier quarter’s readings. As far as earnings surprises are concerned, Lincoln National’s bottom line beat the Zacks Consensus Estimate once in the last four quarters and missed the mark on the other three occasions, the average negative surprise being 10.4%.
Our proven model doesn’t conclusively predict an earnings beat for LNC this time around. This is because the stock has an Earnings ESP of 0.00% and is Zacks #3 Ranked.
Lincoln National Corporation Price and EPS Surprise
Lincoln National Corporation price-eps-surprise | Lincoln National Corporation Quote
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Lincoln National Corporation (LNC) : Free Stock Analysis Report
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